Iain Martin is a political commentator, and a former editor of The Scotsman and former deputy editor of The Sunday Telegraph. He is the author of Making It Happen: Fred Goodwin, RBS and the men who blew up the British economy, published by Simon & Schuster.. As well as this blog, he writes a column for The Sunday Telegraph. You can read more about Iain by visiting his website

Lib Dem jewellery tax shows Britain is moving to the Left

The problem with a mansion tax is not just that its implementation would be messy. Will the entire housing stock need to undergo a revaluation? And if not is it fair that only houses the government likes the look of be revalued? Lawyers would have a field day here. But the main difficulty is philosophical. If you can tax someone for owning an expensive house – which they have paid for out of taxed income – then what is to stop you taxing aggressively what is inside the house, possessions paid for, again, out of taxed income? Property rights are at risk here and with it the assumption that citizens – once they have paid taxes on income and purchases – own something while alive without the need to account for it annually to the state. A fundamental freedom is at risk.

Tim Montgomerie, the founder and editor of the website Conservative Home, is an enthusiastic backer of a mansion tax. I understand where Tim is coming from on this. There is no way back for the Conservative party, which has not secured an overall majority in a general election since 1992, that involves it being the party of the rich and special interests. I think the Tories would be wise to take a Teddy Roosevelt approach by trust-busting monopolistic interests and supporting the aspirational and the quiet middle.

But once you start with wealth taxes, where do you stop? The ratchet only moves in one direction. As if to prove the point, right on cue, up popped the Lib Dems at the weekend with their "jewellery tax". Fear not, said Vince Cable, this will never happen. It is just a discussion paper from the silly old Lib Dem federal executive whatnot committee and some of the party's MPs. The wily Cable instantly saw the danger in terms of the Eastleigh by-election and of voters getting the idea that the Lib Dems want to establish a jewellery hit-squad of tax inspectors :

Tax inspector (clutching warrant, breaks down front door): "My, what lovely earrings, madam. Do you have a licence for those?"

Tax inspector: "I'm sorry, hand them over. Those earrings are being impounded. They now belong to Vince Cable and Ed Miliband who will use the proceeds from their sale for increasing the tax threshold at the bottom end and generally rebalancing the UK economy in a One Nation direction."

Britain is, I suspect, moving steadily leftwards on taxation. The climate has changed. All sorts of ideas which a decade ago would have been regarded as potty are now mainstream; the government owning enormous shareholdings in banks springs to mind. Adding one trillion pounds to the national debt is another. A government with Conservatives in charge of the Treasury is dragging millions more into the 40p tax band with such relentlessness that one wonders whether George Osborne hopes eventually to make 40p the new flat-tax rate paid by middle class Britain.

Of course it is all a reaction to the financial crisis, and a decade of bankers bonuses and oligarchical super-wealth. If the economy is not recovering, and our living standards are squeezed, then those in £2m houses can feel some of the pain. If we are not all quite "in it together" then we can at least spread the misery around a bit. This creates considerable opportunities for statist politicians such as Ed Miliband, and those in the Lib Dems who share his attitude to taxation and redistribution.

The Conservatives are not well placed to respond, in the way that, say, Margaret Thatcher was when the climate was similiarily statist. The current Tory party leadership does not have a clear world-view on taxation or wealth creation. Cameron and Osborne have made great play of their pragmatism since 2005 in avoiding what they see as dogma on these matters. The result? The personal taxation system is now more of a mess, with confusing incentives and punishment of aspiration, than it was even under Gordon Brown. They struggle to make the case for low taxation in response to demands for even higher taxes because their own position is so confused.

Short of Cameron getting it together (which is possible, but the window of opportunity is closing) the two most likely outcomes of the next election are a Labour government and a Labour and Lib-Dem coalition. Miliband as Prime Minister will go for wealth taxes, he has made that clear. If there are coalition negotiations a mansion tax would be part of the package, obviously, along with a return to the 50p tax band that the Lib Dems never wanted cut. And it is not difficult to imagine other wealth taxes ending up on the table in a little over two years time. The Lib Dem jewellery tax paper, dismissed now, is just the start. There will be more such discussion papers and more agitation for punitive taxation.

Will any of it power Britain to sustained recovery and help create wealth? Nope.